Only four currencies have appreciated by more than 4% versus US Dollar since end-July: the high-yielding South African Rand (4.6%) and Mexican Peso (5.8%), the Chinese Renminbi (4.4%) and Korean Won (5.2%). The Renminbi’s steady pace of appreciation will, all other things equal, put further downward pressure on Chinese headline CPI-inflation (1.7% yoy in September) and dent export competitiveness. This
Read moreMarket volatility has been reasonably subdued in recent weeks, despite acute event (and macro data) risk in the next four weeks, including of course US presidential elections on 3rd November, and a number of significant macro, policy and geopolitical developments. In the past month volatility in major developed and emerging market currencies versus the US Dollar has only risen materially
Read moreWe are sticking to our forecast, first set out in Shape of Recovery: Square Root & Hockey Stick (5th June 2020) that global GDP, which contracted about 7.0% qoq in Q2 (a number flattered by China’s GDP), will rise a record-high 3.0% qoq in Q3. However, this implies that world GDP will still only be at the level which prevailed
Read moreMuch of the market focus in recent months has been on major reserve currencies, namely: The US Dollar which, contrary to bearish expectations and in line with our benign Dollar view, has treaded water in the past six weeks and since the Fed’s tweak on 27th August to its dual inflation and employment mandate; The Euro’s rapid appreciation in July,
Read moreMarkets bereft of key macro data releases and policy events in recent days will be turning their attention tomorrow to the European Central Bank’s policy meeting. The consensus forecast, which we share, is that the ECB will leave its policy rates, including its deposit rate (-0.50%), and the modalities of its PEPP and APP unchanged. However, unnamed ECB Governing Council
Read moreSterling has enjoyed a strong, if bumpy ride, since late-June. It has been the second strongest major currency against the US Dollar and appreciated 3.7% in NEER term, thanks in part to a build-up of speculative long-Sterling positions. Markets have seemingly taken heart from government measures to support the economy, including the labour and housing markets and service sector, the
Read moreFed Chairperson Powell, in his opening speech at the “virtual” gathering of central bank governors yesterday announced that going forward the Fed would “seek to achieve inflation that averages 2% over time” and therefore that “following periods when inflation has been running persistently below 2%, appropriate monetary policy will likely aim to achieve inflation moderately above 2% for some time.”
Read moreThe United States’ post-war record GDP contraction in Q2 of 9.5% qoq and the Dollar’s recent depreciation have been making headline news but some perspective is required. The US GDP contracted about 10.6% in H1 2020, far more than in China (+0.6%) and South Korea (-4.6%). However, of other economies which have so far released Q2 data – including the
Read moreThe volume of retail sales – the value of the sale of goods adjusted for domestic inflation – rose a faster-than-expected 14% mom in June. In level terms UK retail sales were only 1% below the average recorded in the 12 months to February 2020. This points to a very rapid recovery in domestic economic activity, albeit from a
Read moreChinese GDP growth (seasonally-adjusted) was 11.5% qoq in Q2. This was stronger than consensus forecast (+9.6% qoq) and more than reversed Q1 contraction of 9.8% qoq. This record-high growth reflects both a post-lockdown bounce in economic activity and of course extremely “favourable” base effects. This is pertinent for China but also its key major trading partners and global economy. China
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